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BU204_03_Johnson_Jennifer_Unit 8 Homework

BU204_03_Johnson_Jennifer_Unit 8 Homework - Jennifer...

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Jennifer Johnson Kaplan University BU204- 03 Macroeconomics Anthony Brogna Unit 8 December 7, 2010
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Fiat money “is a medium of exchange whose value derives entirely from its official status as a means of payment.” (Krugman & Wells, 2009, p. 385). After reading, the information fiat money is currency that a government has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith. M1 “is the most liquid, consisting of currency in circulation, checkable bank deposits, and traveler’s checks.” (Krugman & Wells, 2009, p. 387). To put in very simple M1 is paper money coins. After reading the information on M1 payments by check are normally recognized on the day of receipt of the check, but in reality the recipient does not have access to the amount received until the check clears, which may take a day or more.
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